Chapter 1 INTRODUCTION: CONCEPTUAL FRAMEWORK

I. Background: 1. The concept of Performance Appraisal dates back to the First World War and was then called Merit Rating Programme. Over a period of time, this concept has been through an ocean of change. The areas of evaluation have also changed. 2. Once an employee has been selected, trained and embarked on his duties, it is time for performance appraisal. What is performance appraisal? Why do companies need to take up this task? 3. According to Carl Heyel, author/editor on management, philosopher and teacher, it is the process of evaluating the performance and qualifications of the employees in terms of job requirements, for administrative purposes such as placement, selection and promotion, to provide financial rewards and other actions which require differential treatment among the members of a group as distinguished from actions affecting all members equally. II. An integral part of performance management system: 1. Effective performance management requires a good deal of face-to-face supervisor-employee interaction. By knowing the subordinates, a supervisor can steer them onto a path of greater productivity and optimized output. Long-term successful business owners view performance appraisal as a process of getting to know the people who work for them. It is the most significant and indispensable tool for an organization. It provides information, which helps in taking important decisions for the development of an individual and the organization.

2. Thus, one phase of the annual performance management cycle is performance appraisal, the process of reviewing employee performance vis--vis the set expectations in a realistic manner, documenting the review, and delivering the review verbally in a face-to-face meeting, to raise performance standards year over year through honest and constructive feedback. In the process management expects to reinforce the employees strengths, identify improvement areas so that one can work on them and also set stretched goals for the coming year. 3. It is composed of the following two processes both of which are qualitative subject to human bias a. observation and b. judgment 4. The parameters of performance are a combination of technical expertise and behavioural attributes. The latter scores a high degree of relevance with regard to potential appraisal.
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III.

Concept Of Performance Appraisal: The concept of Performance Appraisal can be explained with the analogy illustrated below:

The head of the key represents the uniqueness of the employee. No two employees are alike. The ring represents the managements requirement -the job content. The shaft represents the communication between the employee and the company, the transmission of the task and the response from the performer. IV. Change: 1. A few decades ago, the employee used to be appraised by his department head. The department head used to communicate his feedback and comments only to the immediate superior of the employee. Thus the feedback was kept confidential in nature. As time passed by, the immediate superior started appraising his subordinates performance and sending his confidential report to the department head. These were the periods when the employee was not included in his appraisal process. The decisions used to be taken by his superiors relating to his pay hike, promotion etc. Thus the system was non-transparent. 2. The current process of performance appraisal is much more open and gives some scope for self-appraisal by the employee. The self-appraisal is followed by a joint discussion with superior and then a decision is taken by the department head on his promotion, pay hike etc. The feedback relating to his performance is directly given to the employee. Thus performance appraisal process has gone through the phase of non-transparency to transparency. 3. In this transparency phase, a performance appraisal can be defined as a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or bi-annual), in which the work performance of the subordinate is examined and discussed, with a view to identifying weaknesses and strengths as well as opportunities for improvement and skills development.

4. Whether an organization accepts or not the usefulness of Performance Appraisal, whether it adopts a formal appraisal system or not, top management is constantly appraising the performance of its subordinate managers in day-to-day interaction. The latter are doing the same to their own subordinates. They are doing so because Performance Appraisal, formal or informal, lies at the heart of art of managing. 5. Managing is a dynamic process, concerned almost entirely with the present and the future, whereas Performance Appraisal, as generally used has been a static rating of an employee related almost entirely with the past. Recently, as some managements were recognizing that rating by itself had very limited utility, they began to appreciate that managing had evolved into an art. They saw that management by hunch could not longer be tolerated, and that measurements-no matter how vague were essential for the future development of the art of managing. 6. The need for measurements gave birth to several systems of managing which attempted to apply measurements of various sorts to the different aspects and elements of the managers job. A number of these systems leaned on the better Performance Appraisal methods for their measuring devices or at least for a starting point for measurement. In some instances, these systems expanded or broadened the meaning of Performance Appraisal from a mere rating to include the whole concept of management with all its elements. What sets the foundation of Performance Appraisal? The same has been covered in the following Chapter 2.

Chapter 2 FOUNDATIONS OF PERFORMANCE APPRAISAL

Performance Appraisal assesses how well people have been doing their jobs and what they must do to be better in their jobs. It deals with the content of the job and what they are expected to achieve in each aspect of their work. Following are the foundations in Performance Appraisal process: I. Job Profile: Job description concentrates more on the definition of tasks the jobholder has to accomplish. It includes details of reporting relationship and normally covers the overall purpose of the job. It indicates how an individuals job will contribute to the achievement of objectives of a team or a department and, ultimately the mission of the organization. Objectives: An objective describes something, which has to be accomplished. Objectives define what organizations, functions, departments, teams and individuals are expected to achieve. There are two types of objectives: i. Work or Operational Objectives: It refers to the results to be achieved or the contribution to be made to the accomplishment of team, departmental and corporate objectives. Developmental objectives: It is concerned with what individual should do and learn to improve their performance and/or their knowledge, skills and competencies (training and personal development plans).

II.

ii.

III.

Competencies: Competencies refer to the behavioral dimensions of a role. It is the behavior required of people to carry out their work satisfactorily. Competencies are what people bring to a job in the form of different types and levels of behavior. They govern the process aspects of job performance. Values: Increasingly, organizations are setting out the core values that they think should govern the behavior of all their employees. Value statements may be prepared which define core values in areas such as care for customers, concern for people, competitiveness, excellence, growth, innovation.

IV.

What are the essential steps that set the foundation for an effective Performance Appraisal? These steps have been covered in Chapter 3.

Chapter 3 THREE ESSENTIAL STEPS FOR EFFECTIVE PERFORMANCE APPRAISAL

The process of getting to know the people who work for the organization involves three essential steps viz. training, evaluation and review. I. Training: Successful training is the implementation of a system in which everyone in the workplace is geared towards improvement. It involves a hands on approach in which the employee is encouraged to evaluate himself or herself under the guidance of the appraiser. How it works? First, the appraiser includes the employee in the appraisal process. When an employee knows that his or her opinion of other workers is taken into account, he or she also realizes that everyone elses opinion matters just as much. This not only empowers the employee and improves relations in the workplace, but it encourages higher productivity as well. This interactive approach is made complete with the leadership of the appraiser. Carefully administering praise coupled with constructive criticism keeps the workforce on its toes. Evaluation: The best methods for employee evaluation are based on results and behavior. While conducting performance appraisal based on employees characteristic traits is quite common, the results are often subjective and unsatisfactory. A results-based approach to performance appraisal is by far the cleanest, most objective method of tackling the complex task of evaluation. It uses a rating system to measure productivity within a given timescale. If an employee makes a certain number of sales in a certain week, he or she can be rated by sheer worth as well as ranked against other employees. The study of behavior is closely tied to productivity. The pace of work, willingness to put in overtime and ability to work with others all contribute to overall productivity. Review: The review process should, again, employ the techniques of interactivity. Before sitting down together, the appraiser should give the employee a chance to review himself or herself. This not only empowers the employee, but also saves a lot of time and possible contention during the actual discussion. Initially the appraiser should walk the employee through the process. The successful supervisor starts out with an overview of why the review session is needed. Then the supervisor takes the employee down a point-by-point list of every aspect of the job. In each case, the employee should be given a chance to describe his or her achievements and shortcomings. The supervisor should always supplement this with added insight. While praising and applying criticism, the supervisor maintains authority throughout the review and indeed, the entire appraisal process.

II.

III.

How this entire interaction and review process is beneficial to the organization as a whole and what are the objectives of performance appraisal? These have been jotted down in the succeeding Chapter 4.
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Chapter 4 OBJECTIVES AND BENEFITS

The objectives and benefits of Performance Appraisal system can be summarized as under: I. Objectives: Data relating to Performance Appraisal of employees are recorded, stored and used for several purposes like: Let the employees know where they stand in so far as their performance is concerned and to assist them with constructive criticism and guidance for the purpose of their development. Assessment of skills within an organization. Set targets for future performance. Effect promotions based on competence and performance. Strengthen relationship between superior and subordinate. Assess the training and development needs of employees. Identify the strengths and weaknesses of employees. Decide upon a pay raise (increments). Improve communication as it not only provides a system for dialogue between the superior and the subordinate, but also improves understanding of personal goals and concerns. This can also have the effect of increasing the trust between the appraiser and appraisee. Determine whether human resource programs such, as selection, training and transfers have been effective or not.

II.

Benefits: The following are the benefits of a successful appraisal system: 1. For the Organization: Improved performance throughout the organization due to: Effective communication of organizations objectives and values. Increased sense of cohesiveness and loyalty. Managers are better equipped to use their leadership skills and to develop their staff. Improved overview of tasks performed by each member of a group. Identification of ideas for improvement. Creation and maintenance of a culture of continuous improvement. Communication to people that they are valued.
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2.

For the appraiser: Opportunity to develop an overview of individual jobs. Opportunity to identify strengths and weaknesses of appraisees. Increased job satisfaction. Opportunity to link team and individual objectives with department & organizational objectives. Opportunity to clarify expectations that the manager has from teams and individuals. Opportunity to re-prioritize targets Means of forming a more productive relationship with staff based on mutual trust and understanding. Due to all above Increased sense of personal value

3.

For the appraisee: Increased motivation and job satisfaction. Clear understanding of what is expected and what needs to be done to meet expectations. Opportunity to discuss aspirations and any guidance, support or training needed to fulfill these aspirations. Improved working relationships with the superior. Opportunity to overcome the weaknesses by way of counseling and guidance from the superior Increased sense of personal value as he too is involved in the appraisal process

In line with the objectives of Performance Appraisal, to reap its benefits, this system has to be effective failing which it may mar the very purpose of performance appraisal. How to make the appraisal process effective is what has been covered in the subsequent Chapter.

Chapter 5 EFFECTIVE APPRAISAL PROCESS

When it comes to performance appraisal, managers and employees agree about one thing: They hate going through them. Employees, managers and HR experts agree that fear, guilt, responsibility and resentment are the real reasons why most employees dread the appraisal process. Besides some think that it is a ritual that is mandatory to follow. An effective review process helps organizations in three areas: 1. evaluation and improving personnel selection and training systems; 2. preventing wrongful termination; and 3. increasing real employee diversity I. II. Good appraisals start with information from multiple sources, and they evaluate employees at all levels from top to bottom. This system requires both the appraisee and appraiser to jointly assess the employees ability to complete the duties and achieve the goals set forth in the previous appraisal. HR professionals should consider the following steps and make the appraisal process simple yet effective: The performance Appraisal form should reflect the strategic objectives of the company. Many organizations use a form that contains several sections. The results and impact section should address accomplishments related to job responsibilities, goals and projects. It is a review of past performance. A skills and abilities section should discuss the ways those results were accomplished. By listing the core competencies for each job classification and for the entire organization this section can address the kinds of behavior that are critical for success. Appraisal results, either directly or indirectly, determine reward outcomes. The better performing employees may get the majority of available merit pay increases, bonuses and promotions, while the poorer performers may require some form of counseling or in extreme cases no increases in pay. The assignment and justification of rewards and penalties through performance appraisal is a very uncertain and controversial matter and conveys both satisfaction as well as dissatisfaction with an employees job performance. Whatever is the case, organizations should foster a feeling that performance appraisals are positive opportunities that provide for overall development of the employee, in order to get the best out of the people and the process. Hence performance appraisals should be positive experiences and it should never be used to handle matters of discipline.

III.

IV.

Performance review needs goals to be set first. Identification of Key Result Areas i.e. Goal Setting has been explained in the Chapter 6.
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Chapter 6 IDENTIFICATION OF KEY RESULT AREAS (KRAS) GOAL SETTING

Setting of Key Result Areas i.e. goals is one of the various parameters of performance evaluation. These are also known as the Targets or Performance Indicators (PI). Target setting is the first step in the appraisal process, based on which the employee is appraised. I. The Purpose or Objective of Target Setting Ensure that each individual is working towards clearly stated objectives that tie into the division goals. Provides a sound basis to improve performance. Encourages open communication concerning expected results and progress towards results. Helps the individual know How he/she is doing compared to what his/her manager expects. Encourages comparison on individual objectives to identify overlapping or omitted objectives. Helps in salary review, and self-development. The recent trend from a focus on traits or behavior to a results-oriented approach has seen the emergence of objectives setting as a key issue. However, managers should attempt to agree objectives with their staff rather than setting them themselves for the forthcoming period during appraisal discussion. These objectives or targets should comply with the mnemonic SMART i.e. Specific, Measurable, Achievable, Realistic and Time-bound. II. SMART criteria for performance goals SMART Performance Criteria Checklist Goals Specific States in clear terms Does it specify what outcome, result or - Improved level of quality, quantity, time or use behaviour is to be of resources. achieved. - A new/innovative result, faster time line, or - An improved behavioral outcome? Does it have a clearly stated singular result? Measurable Includes measurable Will you know from information, data or results or a description of observation when it is achieved? the desired outcome. Does it specify-What? How much? How well?

SMART Performance Goals Achievable A realistic expectation, given time and resources Realistic There is a clear tie to goals of the department, division etc. Time Bound There is a time limit or deadline by which the objective must be achieved and there may be a time frame to track phases of completion in an action plan. III.

Criteria Checklist Are resources, authority level, and requisite skills in place? Does it require a stretch of effort? Will it matter when it is done? Does the objective support relevant goals? Does it deal with a key aspect of the job? When are the goals to be completed? Is there a timetable for milestones or checkpoints?

Type of Goals: One may have to set multiple goals combining goals at different levels viz. the long-term goal, the short-tem goal and the minimum or standard goal. 1. The long-term goal: The long-term goals are the level of performance sought over a period of one to two years. Usually this level is significantly better than current performance. In some cases, the long-term goals are the ultimate level of performance, such as zero defects or zero absenteeism. Unlike the other two goals (described below), the long-term goals can be dictated by management without regard to past performance or to whether the long-term goals is currently perceived as attainable. 2. The short-term goal: The short-term goals is the level of performance desired and perceived as being attainable with some effort within a period ranging from three months to one year. At the end of that time, short-term goals are re-evaluated based upon performance. The expectation is that when the short-term goal is consistently being met, it will be moved closer to the long-term goal. It must be less than or equal to the long-term goal It cannot be better than the best performance ever achieved; and It must be better than the current average or typical performance. Shortterm goals are negotiated. Usually employees and lower level managers recommend and develop short-term goals subject to approval by management.

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3. The Minimum or Standard goal: The minimum or standard goal is the cut-off point for signaling the existence of or potential for a performance problem. Like short-term goals, minimum standards are set for a limited period but for longer duration perhaps one to two years. Minimums/standards are negotiated like short-term goals and must conform to the following criteria: They must be less than or equal to current average/typical performance; and They cannot be worse than the worst performance for any previous period. IV. To aid goal setting the following steps may be adopted: 1. Consider the job on the following areas: Routine responsibilities Problem solving responsibilities Innovative responsibilities - Development responsibilities 2. 3. Locate key tasks in each of the above areas. Periodic Progress Review The intent of this review is to provide a reconfirmation of direction to maintain commitment for the balance year. Targets, though should be stable over the performance period, should be flexible enough for revision when changes in priorities or responsibilities lead to the expectation of different results.

V.

Key Steps to Goal Setting: 1. The appraiser should: in advance, review notes on employees performance; discuss targets, praise achievements and identify causes of targets not being met; discuss performance skills, reinforce good performance and identify causes for skills not being met; agree on the plan for corrective actions to be taken by both; where necessary, revise targets; create a non-threatening climate and express confidence. 2. Joint Accountability: Management must recognize that most results are achieved through the corporate efforts of two or more people. Therefore, the management style must encourage maximum individual contribution in co-operation with others.

Decision on pay hike, promotion and development is outcome of target achievement and the same has been detailed in following Chapter 7.

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Chapter 7 PERFORMANCE, PAY AND DEVELOPMENT

The outcome of the appraisal is either in the form of reward by way of increase in pay, additional bonus or incentive and/or promotion, or by way of not effecting any increase in pay, denying promotion etc. This gives emergence to the concept of Performance Related Pay (PRP). I. Performance related pay is not an easy option. Before embarking on its introduction the following factors should be taken into account. 1. Matching the Culture: Successful PRP schemes need to match the culture and core values of the organization. It is only by understanding and working with the culture that it is possible to develop schemes. Linking PRP to the Performance Management process: The focus when relating pay to performance needs to be one of the issues which emerge from the business planning process such as profitability, productivity, cost control, research initiatives, product and market development and generally increasing stakeholder value. Balancing performance measures: The performance measures used as a basis for rating must include a balanced mix of both input factors (skills and competences) and output factors (performance and contribution). The assessment upon which pay decisions are made should be based not only on performance in achieving objectives, contribution to organizational success and the levels of skill and competence achieved, but also on the degree to which the behavior of individuals support corporate values in such areas as teamwork, total quality management, customer services, innovation, etc. Flexibility: PRP arrangements should allow for some flexibility in the criteria for reward and the method of payment. Teamwork: Poor PRP schemes can produce a lot of single-minded individuals. The importance of teamwork should be recognized in structuring the scheme and in defining critical success factors and performance indicators. Individuals should be aware that achieving their targets at the expense of others is not considered competent performance. Avoiding Short-termism: To avoid the danger of PRP focusing attention on short-term results at the expense of more important longer-term objectives, long-term as well as short-term goals should be set wherever appropriate and short-term objectives should be discussed in their overall context.
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2.

3.

4.

5.

6.

7.

Involvement in the design process: The design of PRP schemes is usually an iterative process- trying and testing ideas on measures and structure with those who will eventually be involved in the scheme. It is also a valuable learning process, which can throw up fundamental strategic and business issues. Those due to participate in the scheme should have an input into agreeing critical success factors and performance indicators both for themselves and the organization. Getting the message across: PRP provides a very powerful form of communication. To get the right messages across, the following question will have to be dealt with: a. Assess reasons for PRP Why do we want to introduce PRP? What, realistically, do we expect to get out of it? Assess readiness for PRP Is PRP right for our culture? Do we have the Performance Management and other processes in place required for successful PRP? Are the attitudes of management and other employees in favour of PRP? (An attitude survey can be conducted to establish opinions). Do the people concerned with managing PRP have the required skills and resources? Is PRP likely to make a significant enough impact on performance to justify the costs of developing, introducing and operating the scheme? Decide whether or not to introduce PRP Does the result of the above assessment indicate that PRP is right for the organization? If no, what are the alternatives? There are many: Consider performance-related team pay, organization-wide profit sharing or
profit-related pay plans, gain sharing, the use of incentive or bonus schemes, concentrating more on the motivational aspects of Performance Management, job re-design to increase motivation, performance-related training more intensive management coaching and training to improve leadership abilities, process re-engineering to improve organizational performance and productivity.

8.

b.

c.

d.

Brief, consult and involve employees How should employees be informed of the organizations objectives and intentions concerning the introduction of PRP? How do we minimize concerns about PRP through this briefing process? To what extent and how should we consult and involve employees?
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e.

Design scheme What criteria should be used for determining PRP awards? It can be an appropriate mix of: Input criteria related to the skills and knowledge brought to bear on fulfilling role responsibilities Process criteria related to the behavioral competencies used successfully in achieving results Output performance indicators related to the achievement of objectives and meeting performance requirements as set out in statements of principal accountabilities or main tasks Outcome contribution indicators which measure how outputs contribute to the achievement of team, departmental and organizational objectives and how the behavior of individuals support corporate values To what extent will it be possible to define the criteria in the key jobs for which PRP will operate? Are performance measures available for these criteria, which will enable fair and consistent assessment to be made? What form of rating system should be used? How are we going to ensure that ratings are fair and consistent? What are our policies be on the size of payments in relation to performance, contribution, skill and competence? What should our policies to be on the rate of progression and any limits to progression within pay ranges? Does the organization want to make provision for performancerelated lump sum bonuses for special achievement or sustained high-level performance at the top of a range? Should PRP reviews be separated in time from performance reviews conducted as part of the Performance Management process? What rating, pay increase and budget guidelines are going to be issued to managers implementing PRP in their departments? Should performance matrices be used? If so, how should they be constructed? How PRP will be monitored and its effectiveness be evaluated? How the cost of PRP would be controlled? What is the program for developing and introducing PRP? Brief and train How the organization is going to brief and train line managers on the PRP scheme? How the organization is going to brief employees in general on PRP so that they understand how it will operate and how they will benefit?

f.

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g.

Implement How the process should be started? Even after due care some unforeseeable problem will arise. It is often advisable to start with a pilot scheme, probably at management level so that they understand the principles, benefits and problem before applying PRP to the people for whom they are responsible. How to monitor the introductory stages? It is essential to keep closely in touch with how things are going so that problems can be anticipated or dealt with swiftly when they arise. Evaluate Have clear objectives been established for the scheme the progress towards which can be measured and evaluated? How to carry out a continuing monitoring and evaluation process? Who is responsible for evaluation and taking any corrective action that may be required? What points should be covered?

h.

9.

Evaluating Performance Related Pay It is essential to evaluate the acceptability and cost effectiveness of PRP. The following questions should be answered: To what extent have the defined objectives of PRP been achieved? How much have been paid out under the scheme? What differentials have emerged between high/average performers over, say, 2-3 years? What measurable benefits has PRP produced in the shape of improved organizational, team and individual performance? How do managers regard PRP? Do they, for example, believe that it is operating fairly? To what extent have rewards been linked to key and measurable areas of performance? Are rewards meeting peoples expectations? Do Performance Management processes provide adequate support for PRP? Do the organization want to retain PRP in its present form? If not, what are the alternatives?

10. Performance Related Pay (PRP) in practice There is no doubt the system of PRP must be made to fit the culture of the organization. This either means that the existing culture can be receptive to the competitive and individual elements of PRP or the culture has to be changed. PRP can be used as part of the change process but, on its own, it is unlikely to be powerful enough to prove successful.

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11. Performance Related Pay (PRP) a judgment? Does Performance Related Pay work? Most experience in the United States is that greater use of performance pay results in improved organizational performance as measured by return on capital employed, particularly when applied to managerial pay. In the United Kingdom, the few studies have been largely negative or inconclusive. Finally, all research has confirmed that employees regard positively the concept of PRP but deny quite strongly that it acts as a motivator for them in practice, and are mostly critical of the resulting procedural and distributive justice. It can be concluded that employees may work harder, in a more focused way and get better results through a PRP system which is under printed by a robust performance management scheme but employees may do this through a mixture of necessity and fear, rather than a genuine desire to do so. Employees need to be developed for superior performance. PRP helps in identifying the development areas for an employee and where he needs to be counseled. The concept of counseling is discussed hereafter.

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THE COUNSELING PROCESS

Counseling is an act of providing professional guidance. It involves the long-term development and realization of the potential of an employee through the technique of advising. Performance management counseling is a valuable tool for superiors to use, particularly when subordinates show substandard performance. I. The main objectives of counseling are: helping appraisee to realize his potential helping appraisee to understand himself i.e. his strengths and weaknesses providing appraisee an insight into his behavior. helping appraisee to have better understanding of the environment identifying performance problems or obstacles encouraging appraisee to generate alternatives for dealing with various problems

II. The counseling process consists of three stages: Recognition and Understanding Empowering : Recognizing and understanding the Indications of problems and issues. : Enabling the employee to recognize his own problem or situation and encouraging him to express it. : Managing the problems, this will include the decision on who is best able to act as counselor the manager or a specialist.

Resourcing

III. Approaches to Counseling: The following are different approaches to counseling: 1. The Tell and Sell Approach: Appraiser lets appraisee know how he/she is doing. Gets appraisees acceptance of the evaluation. Gets appraisee follow a plan outlined for improvement. 2. The Tell and Listen Approach: Appraiser lets appraisee know his performance. Appraiser allows the appraisee to respond. Appraisee is allowed to think and decide what needs to be done. The Problem Solving Approach: Appraiser encourages appraisee to identify problem areas. Appraisee discusses with appraiser in deciding what should be done about the problems. Steps are taken to solve problems.

3.

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Of the three approaches discussed above, the problem solving approach is the best approach. The below comparison justifies how: The Tell and Sell Approach Requires considerable skill to get people to accept criticism Is more of a oneway communication process, indicating authoritarianism The Tell and Listen Approach Requires skills on the part of appraiser in listening Better than the `tell and sell approach since it involves appraisee does Such approach may Appraiser not motivate the not play a very appraisee or even active role may turn counterproductive The Problem Solving Approach Encourages appraisee to review his own performance and identify problem areas thus motivating appraisee Appraiser does not impose his decision but discusses problems with appraisee This also requires skills but is the most effective method of counseling where both appraiser and appraisee enjoy confidence of each other and work together in the direction of finding out solutions.

IV. Counseling is an art and requires skills, which are difficult to acquire in the normal course of work. It is, therefore, suggested that appraisers should be provided with special training by experts in counseling skills. Counseling skills required by a good appraiser are: Problem identification : recognizing that the problem exists. by open-ended, non-directing Probing : probing questions to make the appraisee more comfortable. Listening : ability to listen attentively by probing, evaluating, interpreting and supporting. Sensitivity : sensitivity to individual beliefs and values. Reflecting : being able to restate the problem from appraisees point of view. Empathy : having regard for feelings and anxieties of the individual. Impartiality : ability to remain impartial. Sincerity : having a genuine attitude of interest and openness to the individuals problems. Belief : having the belief that individuals have the resources to solve their own problem, with some help and guidance.

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V. Follow-up of completed appraisal: Post appraisal is very crucial for helping employee and the immediate superior i.e. appraiser playing the role of a Facilitator and Developer. Enough time (say one week) should be given for the appraisee as well as appraiser to prepare for Post-Appraisal discussion. This discussion should be devoted uninterrupted and sufficient time, say an hour or so. Appraisee should be put at ease and allowed to first speak on his performance. The appraiser should listen attentively without interruption with patience. Appraiser should be supportive and objective on performance evaluation of the employee. Appraiser should discuss the training and development needs with the appraisee. Finally, the meeting should conclude wherein the appraisee leaves with a feeling of empowerment.

The subsequent chapter gives guidelines on Designing an Appraisal Process.

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Chapter 8 DESIGNING AN APPRAISAL PROCESS

Before understanding the process of appraisal, the following terms are revised: Performance refers to an employees accomplishment of assigned tasks. Performance Appraisal is the systematic description of the job-relevant strengths and weaknesses of an individual or a group. Appraisal period is the length of time during which an employees job performance is observed in order to make a formal report of it. Performance Management is the total process of observing an employees performance in relation to job requirements over a period of time (i.e. clarifying expectations, setting goals, providing on-the-job coaching, storing and recalling information about performance) and then making an appraisal of it. Information gained from the process may be fed back via an appraisal interview to determine the relevance of individual and work-group performance to organizational purposes, improve the effectiveness of unit and improve work performance of employees.

Designing an appraisal program poses several questions, which need answers. They are: 1. 2. 3. 4. 5. 6. 7. 1. Whose performance is to be assessed? Who are the appraisers? What should be evaluated? When to appraise? What problems are encountered? How to solve the problems? What methods of appraisal are to be used? Whose performance should be assessed? The answer is obvious employees. When we say employees, it is individual or teams? Specifically, the appraisee may be defined as the individual, work group, division or organization. 2. Who are the appraisers? Appraisers can be immediate superiors, specialists from the human resource department, subordinates, peers, committees, clients, self-appraisals or a combination thereof.

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3.

What should be evaluated? One of the steps in designing an appraisal program is to determine the evaluation criteria. It is obvious that the criteria should be related to the job. The criteria for assessing performance can be: a. b. c. d. e. f. g. h. i. j. k. Quality & Quantity Timeliness Cost Effectiveness Need for supervision Interpersonal impact Innovation & Creativity Problem Analysis Customer orientation Market Orientation Entrepreneurial Drive Negotiation skills etc.

This is not an exhaustive list, but several other parameters too can be added depending on job requirements and organizational needs. 4. When to appraise/rate? The most frequent rating schedules are semi-annual and annual. New employees are rated more frequently than older ones. Some practices call for ratings: 5. Annually as per company practice After first 6 months of employment Upon promotion or within 3 months after promotion When the job occupied has been reevaluated upward Upon special request, as when the employees salary is below the average pay

What are the problems related to Performance Appraisal? An ideal Performance Appraisal is done when the evaluation is free from biases and idiosyncrasies of the evaluator. There are many factors of appraisal that lead to failure of the system: a. Negative attitude towards Performance Appraisal: There is a large population of managers who are hostile or indifferent to the Performance Appraisal processes and/or do it badly if they do it at all. i. Hostility from the appraiser: The appraiser reacts indifferently to the appraising system because he believes that it is a waste of time. At times they feel that the scheme has nothing to do with their own needs and it exists to feed the personnel database.

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ii. Hostility from the appraisee: Hostility from the people at the receiving end arises because they feel Performance Appraisal is simply another method in the hands of the managers to exercise their command and control prerogatives. They feel that the data collected will be utilized as evidence against them. In some cases appraisees even have a feeling that the outcome of the performance evaluation is predetermined by the management or their superiors and the process is completed only as a formality, due to which appraisees lack interest in the entire appraisal process. b. Halo Error: Under this type of error, one marked characteristic or latest achievement or failure of the appraisee (either favourable or unfavourable) may be allowed to dominate the appraisal for the entire year. Logical Error: This is a dangerous pitfall for the inexperienced appraiser. He is very often inclined to arrive at similar assessments in respect of qualities that seem logically related. Constant Error: When two appraisers rate an appraisee their ratings may be different. One may show consistent leniency by giving him high scores, the other my consistently rate him by giving low scores. Central Tendency: It is also called as Average Ratings. Here, the appraiser tends to avoid giving frank views to the question asked or the appraiser is in doubt or he has inadequate information or he simply wants to play safe and dont displease anyone. Mirror-Image Error or Projection Error: This error arises when an appraiser expects his own qualities, skills, and values in an appraisee. The appraiser may falsely believe that if the appraisee is good he has to be like him (appraiser) because the appraiser considers himself as the standard. Contrast Error: This error occurs in the sequencing of ratings. If superior performers are rated first, average performers are rated down, if poorer performers come first, the average performers will be rated more highly. Biases of position, Sex, Race, Religion & Nationality: There is a tendency to rate the occupant at a higher position more favorably than the person in a lower position. Similarly rating can be biased based on sex, religion and nationality too. Lack of Skill in conducting Appraisal discussion: Conducting Performance Appraisal discussions require certain skills and training.

c.

d.

e.

f.

g.

h.

i.

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6.

How to solve the appraisers problems? The best way to overcome the problem is to give training to the appraiser. Training can help improve the appraisal system to the extent that distortion occurring due to appraiser errors such as halo, leniency, central tendency and bias are minimized. a. Factors that help to improve accuracy: b. The appraiser has observed and is familiar with behaviors to be appraised. The appraiser has documented behaviors calling for improvement. The appraiser has a checklist to obtain the review on job-related information. The appraiser is aware of personal biases and is willing to take action to minimize their effects. Rating scores by appraisers of one group or organization are summarized and compared with those by other appraisers. The appraiser focuses attention on performance related behaviors over which he has better control than on other aspects of evaluation. Higher levels of management are held accountable for reviewing all ratings.

Factors that may lower accuracy: The appraiser contemplated. rates only when administrative actions are

The appraiser is unable to express herself/himself honestly and unambiguously. Appraisal systems, processes and instruments fail to support the appraiser The appraiser is unaware of causes of rating errors. The appraiser has to rate employees on factors that are poorly defined.

7.

Techniques/methods of appraisal to be used? There are different types of systems for measuring the excellence of an employee. Each type has its own advantages and disadvantages. The earlier developed methods, still being used, are Traditional Methods that are nontransparent in nature. While other newer methods are transparent in nature. Each of the method has its own format of appraisal form. The various techniques and processes have been explained in the forthcoming chapters.

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Chapter 9 TRADITIONAL METHODS OF APPRAISAL

As explained in Chapter 1 Performance Appraisal is an exercise of observation and judgment, a feedback process, and an organizational intervention. It is a measurement process as well as an intensely emotional process. Above all, it is an inexact, human process. While it is fairly easy to prescribe how the process should work, descriptions of how it actually works in practice are rather discouraging. Some of the traditional methods of appraisal are explained below: 1. Ranking In this, the superior ranks his/her subordinates in order of their merit, from best to worst. 2. It is done in a competitive group. It is done by placing the appraisee on numerical scales i.e. 1st, 2nd, 3rd etc. in the total group. Ranking of an appraisee on his job performance/traits against that of another member.

Person-to-Person/Paired Comparison Under this method the appraiser compares each employee with every other employee, one at a time. Certain key performance areas/traits are developed. E.g.: Leadership, Creativity, Initiative etc. A scale for each factor is designed. A scale of people is also created for each factor. Each Appraisee is compared to every other person on the scale. Certain scores for each factor are awarded to the appraisee.

3.

Grading Certain categories of traits/performance criteria, which are worth of appraising, are established. E.g. cooperativeness, self-expression, dependability, job knowledge etc. The actual performance (Key performance area) of an employee is then compared to the predetermined grade definitions. Appraisee is allotted with the grade, which describes his performance in the best possible manner. Any grade that is selected should be well defined.

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4.

Graphic Scales A printed form, one for each person to be rated is used. The factors included in the form are Employee characteristics such as leadership, cooperativeness, enthusiasm, loyalty etc. or Employee contribution which includes quantity and quality of work, specific goals achieved, regularity of attendance, responsibility assumed etc. The traits can be evaluated on continuous scale the appraiser places a mark along a continuum (range). The best method to use is the multiple type of scale wherein one has to tick off the box, which suits the description of an appraisees performance. Certain types of graphs are prepared based on these derived ratings.

5.

Checklist A series of questions are presented concerning an appraisees behavior. The appraiser has to reply to the questions in either negative or positive tone- (Yes/No). The value of each question may be weighted i.e. one can have predetermined scale and scoring to those questions.

6.

Essay A blank form is given to the appraiser. The form contains main heading such as employees characteristics, attitudes, job knowledge, potential etc. The appraiser is asked to put in words his impressions about the employee. It contains factual and concrete knowledge. It gives specific information about the employee.

7.

Confidential Reporting It is the most traditional way of appraising employees performance. The basic assumption here is that since the superior is in direct contact he knows his subordinates better than any other and hence his appraisal would be more appropriate. The superior writes a paragraph or so about his subordinates strengths, weaknesses, intelligence, attitude to work, attendance, conduct and character, work efficiency, etc.

8.

Critical Incident Method Initially a set of noteworthy (good or bad) on-the-job behaviours is prepared. This is usually in the form of incidents. These incidents are given to a group of experts who assign scale values depending upon the degree of desirability for the job. This checklist is used by superiors for evaluating the employees.

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9.

This method helps in identifying the key areas where the employees are weak or strong. It emphasizes rating on objective evidence and helps in counseling.

Forced Choice Technique In forced choice system the appraiser is forced to choose one from among a group of 4 statements that best fits the individual being rated and one which least fits him. Each statement is given a value or a score. The evaluator does not know the score value of statements; hence he cannot show any favor towards the appraisee. The method of arranging the traits involves a long process from getting the description of good or bad employees to establishing their validity and reliability.

10. Behaviourally Anchored Rating Scales (BARS) Behaviourally Anchored Rating Scales (BARS) are anchored with descriptive alternative behaviors. For every given category of behavior or performance, statements are ordered in an ascending or descending order of excellence. Although these scales represent job-relevant dimensions of performance, they still pose problems in determining which actually, observed behaviours match with specifically anchored performance scales. Despite this difficulty, BARS are a significant improvement, since they require less inference on the appraisers part as against traditional rating approaches.

The above methods are non-transparent in nature, as the appraisee or the employee is not involved in the process of his appraisal. The rating is done entirely by his superiors. The other methods wherein employee is appraised not only by his superiors but also by the appraisee himself, and in some cases with involvement of third parties are newer methods and detailed in Chapters 10 and 11.

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Chapter 10 RELATIVELY TRANSPARENT METHODS OF APPRAISAL

As time has progressed, there have been advancements in the appraisal system. As against the earlier traditional methods, the newer methods include self-appraisal by the appraisee. After having discussed the appraisal with the appraisee, the appraiser forwards his recommendation to the management for further decision on reward giving. Some of the relatively transparent methods have been detailed below: I. Appraisal Discussion Dialogue Method of Appraisal 1. An appraiser and appraisee get together to engage in a dialogue about the appraisees performance and development. It is like a meeting in which views are exchanged so that an agreed conclusion can be reached. The formal appraisal meeting is referred as discussion because there is a freeflowing affair in which both parties are fully involved. The appraisal discussion provides the means through which the five key elements of Performance Appraisal can be achieved. These are: a. Measurement: It assesses results against agreed targets and standards. b. Feedback: It gives the appraisee information on how he or she has been doing. c. Positive reinforcement: It emphasizes what has been done so that it will be done even better in the future. A constructive criticism is done i.e. points that help in improving performance are given. d. Exchange of views: It ensures that the discussion involves a full, free and frank exchange of views about what has been achieved, what needs to be done to achieve more, what appraisees think about their work, the way they are guided and managed and their aspirations. e. Agreement: Both parties jointly arrive at an understanding about what has to be done in order to improve performance and overcome any work problems raised during the discussion. 3. Opening the Discussion During the discussion the appraiser should build up good trust level with the appraisee and should take following steps to open a discussion: a. He should start by reminding the appraisee of the purpose of the discussion, stressing that this is not to dwell unduly on the past but to look to the future. b. The appraisee should be made aware of the time set aside for the discussion to demonstrate that he is not going to rush through it.

2.

27

c. Continue by explaining that the aim is to come to an agreement on what has been achieved since the last meeting and what is to be achieved in the future. d. This should be followed by a brief exchange in which each party itemizes the key points they want to discuss setting the agenda. e. The discussion can then begin, probably with an invitation from the appraiser to the appraisee to talk generally about the progress he or she has been making during the year with reference to notes made prior to the meeting or a completed preparation form. 4. General Guidelines There are a number of general guidelines on how the appraisal discussion may be conducted. Each of them should be applied according to the circumstances in which the discussion is taking place and the personalities of those involved there is no one right way to conduct an appraisal discussion. a. Let the appraisee do most of the talking. b. Encourage self-appraisal c. Keep the whole period under review d. No surprises i.e. discuss issues at the time they take place. e. Recognize achievements and reinforce strengths f. Criticize constructively g. Adopt a joint problem-solving approach h. Asking the right questions 5. There are four basic types of questions: a. Open Questions: Open questions help to create an atmosphere of calm and friendly inquiry. It can be expressed quite informally, and can be put in a tell me form. E.g.: How do you think things have been going? b. Probing Questions: Probing questions ask for specific information on what has happened and why it has happened. They examine closely the steps that need to be taken to put things right, do better in the future and avoid repeating a mistake. c. Closed Questions: When there is a need to obtain or confirm specific factual data, a closed question, which severely restricts the reply to supplying the information, is asked. E.g. How many times has this happened? d. Leading Questions: Leading questions are those which supply their own right answer, e.g. Do you agree that .?

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A typical appraisal discussion contains a mix of open, probing and closed questions. While the conversation should be kept going with open questions, one needs to identify the real issues with probing questions and get the facts with closed questions. Leading questions should be avoided. 6. Listen carefully An appraisal discussion is a dialogue. Both parties are communicating information and ideas to one another to achieve the purpose of the meeting. Good listeners concentrate on the speaker. They respond quickly to points made by the speaker, ask questions frequently to elucidate meaning, give the speaker an opportunity to rephrase or underline a point, comment on the points made by the speaker without interrupting the flow of conversation.

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II.

COMPETENCY BASED APPRAISAL SYSTEM What is Competency? Competency is an underlying characteristic of an individual, which is casually related to effective or superior performance. Competence based appraisals can be defined as a method of appraising people wholly or partly by reference to the level of competence they demonstrate in carrying out their roles. One of the problems surrounding the concept of competence or competency is that the term is used to refer to the ability to perform a job or task competently and also to how people ought to behave in order to carry out a role with competence. Competence should be used to refer to areas of work in which the person is competent. Competency should be used to refer to the dimensions of behaviour lying behind competent performance. 1. Competence based appraisal must depend on some method of measuring competence. To do this, it is useful to distinguish between the input, process and output aspects of performance and how competence can be measured under each heading. a. As an input, competence can be measured by the capacity within people to do their work well. Capacity refers to what people bring to their work in the form of knowledge, skills and personal attributes. As a process, competence can be measured in terms of the behaviour required of people in order to effectively convert inputs into outputs. As an output, competence is measured by the outcomes of the behaviour of people in making the best use of their knowledge, skills and attributes.

b. c.

2. Appraisals can be related to competence in two ways: as a people-based process which links assessment to the level of competence attained by individuals; or as a job-based process which uses competence headings wholly or partly to evaluate jobs or roles. Both levels of competence and levels of performance in achieving objectives, should be taken into, on the reasonable grounds that they should be assessed not only for how people perform (competence inputs) but also for what they achieve (outputs).

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3. Advantages of competence based Appraisal System High-performance organizations need high levels of competence and hence employees should be appraised according to their level of competence and the contribution they therefore make to the success of the business. Performance-linked appraisals help companies in performance enhancement of employees. Hence competence is important. Competences add value and predict success and hence attributes that lead to successful performance should be appraised. It can provide for the alignment of rewards with core values. It can support a culture devoted to learning, growth and continuous development. It can deliver messages to people about the behaviour expected of them in such aspects of work as team membership, flexibility, continuous improvement, customer relations. It can focus attention on the competences required in knowledge-based organizations which are selling services or solutions, not products, and are therefore people rather than task or product oriented. Competences are geared to sustained performance and are better predictors of future performance than what people happen to have done in the past. It is recognized that it is necessary to assess and reward what people bring to a role in the shape of their knowledge, skills, attributes and competences as well as the results they achieve.

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III. POTENTIAL APPRAISAL Assessment Center Method Under this method, many evaluators i.e. appraisers join together to judge employee performance in several situations by using variety of criteria The most important feature of this method is job-related simulations. These simulations involve characteristics that managers feel are important for the job success. The evaluators observe and evaluate participants as they perform activities commonly found in these higher-level jobs. It involves a paper-andpencil test, interviews and exercises. 1. Features: The use of situational exercise (such as in-basket exercise, business game, a role-playing incident and leaderless group discussion); Evaluators are drawn from experienced managers with proven ability at different levels of management; They evaluate all employees, both individually and collectively. A summary report is prepared by the members, and a feedback on a face-to-face basis is administered to all the candidates who ask for it. 2. Purpose: a. It is used to: Measure potential for first level supervision, sales and upper management positions; and also for higher levels of management for development purposes. Determine individual employees. training and development needs of

Select freshers for entry-level positions. Provide more accurate human resource planning information. Assist in implementing affirmative action goals.

b. It generally measures interpersonal skills and other aspects such as: organizing and planning; interpersonal competence (getting along with others), quality of thinking, resistance to stress, orientation (motivation) to work, dependence on others and creativity. The ability to organize, plan and make decisions, as in-basket simulations and scores obtained on paper and pencil, psychological tests, are important to the overall assessment score. The duration of Assessment Center Program varies depending on the level of appraisee. For example, centers designed for selection of first line supervisors, sales personnel, and management trainees generally last for a day or less; while those used for higher-level managers may run for two or three days or longer if used for developmental and not for selection purposes.

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3.

Problems: The ratings are generally influenced by the participants interpersonal skills; judges tend to evaluate the quality of the individuals social skills rather than quality of the decisions themselves. Further, the organizing and decision-making abilities are measured by in-basket exercises, verbal ability and personal traits. Solid performers in day-to-day operations suddenly choke in simulated environment. Unreasonably high cost of assessing an individual in a particular job level. There are potential bad effects on those not selected to participate in the exercise. Usually immediate supervisors nominate participants. Employees who are curious, independent, aggressive and intelligent may never be selected because such traits, though important at higher levels, are not accepted by lower level supervisors. Poorly rated appraisee may react in negative ways and might get demoralized.

To make Assessment Center Program successful, strong emphasis must be placed on clear statement of goals, obtaining commitment of top management, job analysis, appraiser training, program audit and evaluation.

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IV. PERFORMANCE AND DEVELOPMENT PLANNING Performance and Development Planning (PDP): PDP is a process for managers that aligns individual performance with company goals and ensures focus on the development of talent company-wide. PDP is an important step in their corporate effort to engage and enable employees to deliver their contribution to their business. Also, PDP serves to enable employees to identify and realize personal opportunities for development that are aligned to current and future business challenges. PDP process enables each employee to understand his true value-added to the organization. 1. Steps for successful implementation of PDP: Schedule the PDP meeting and define pre-work with the appraisee. The appraisee does self-appraisal, writes business and personal developmental goals on the PDP form and gathers needed documentation, including 360 feedback results, when available. The appraiser prepares for the PDP meeting by clearly defining the most important outcomes needed from the appraisees job within the framework of the organization's strategic plan. The appraiser writes business and personal developmental goals on the PDP form in preparation for the discussion. The appraiser gathers data including work records and reports and input from others familiar with the apprasiees work. Both the appraiser and the appraisee examine how the appraisee is performing against all criteria, and think about areas for potential development. The appraiser develops a plan for the PDP meeting that includes answers to all questions about the PDP process with examples, documentation, and so on. Recognize that this process takes place quarterly and that the most time and work are invested in the first PDP meeting. The rest of the quarterly PDP goals, maybe for years, are updates to the initial goals. So, while seemingly time consuming on the front end, the PDP process, with a formal, effective foundation of solid personal and business goals, is less time consuming as quarters pass. The PDP continues to create business and employee success and value during its lifetime. With quarterly updates, the PDP process contributes into the future. 2. PDP Process: The PDP process has been explained with the help of a chart as Annexure I. A sample format of PDP form is attached as Annexure II and the PDP form overview is explained in brief as Annexure II (a). All these Annexures have been included at the end of the report.

34

As part of a relatively transparent method of appraisal, a sample form designed and used by a reputed pharmaceutical company for appraising its employees at junior management level is shown as Annexure III at the end of this report. The latest trend of appraising the performance of an employee involves two or more of any of the above detailed techniques including traditional methods. The subsequent chapter details the new frontiers to performance appraisal.

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Chapter 11 NEW FRONTIERS TO PERFORMANCE APPRAISAL

In recent years the system of performance appraisal is becoming more and more transparent wherein the employee, who is being appraised, is involved in the process. The objectives or targets are set with mutual understanding between the appraisee and his immediate superior. The feedback regarding his performance is given to the appraisee with areas of improvement by disclosing his strengths and weakness and the opportunities available. I will take you into details of these new frontiers to Performance Appraisal viz: I. II. III. Management by Objectives (MBO) Balanced Scorecard 360 Feedback

I.

MANAGEMENT BY OBJECTIVES
1. Management by Objectives is basically a process whereby the superior and the subordinate managers of an enterprise jointly identify its common goals, define each individuals major areas of responsibility in terms of the results expected of him and use these measures as guides for operating the unit and assessing the contribution of each of its members. Management by Objectives is primarily to change the behaviour and attitude towards getting an activity or assignment completed in a manner that it is beneficial for the organization. Management by objectives is a result-oriented process, wherein emphasis is on results and goals rather than a prescribed method. A number of companies have had significant success in broadening individual responsibility and involvement in work planning at the lowest organizational levels. The concept rests on a philosophy of management that emphasizes integration between external control (by managers) and self-control (by subordinates). It can apply to any manager or individual no matter what level or function, and to any organization, regardless of size. For instance, the number of quality articles to be churned out in a week at a publishing house is, lets say, five. This is the goal of the organization. This goal has to be set in coordination with the writers. The emphasis here again would be on accomplishing this task flawlessly over the week rather than the setting of a method to accomplish the same. You are giving them a free hand to decide as to how they want to work in order to accomplish target. This gives the employee both responsibility as well as authority to do a job. The employees are now responsible for its success or failure and it is their baby. It is a VERY SMART MANAGEMENT TOOL where the employee is involved in the decision making process.

2.

36

3.

Management by Objectives is a five-sutra process having following basic steps: i. Set Organizational Goals: This envisages that organizational goals and business strategies are expressed clearly, concisely and accurately. They are periodically reviewed. They should be challenging enough to motivate the employee. Clear and attainable goals help channel energies towards desired behaviour and let the employee know the basis on which he will be rewarded. At this time, any appropriate changes in the organization structure should be made: changes in titles, duties, relationships, authority, responsibility, span of control and so forth. ii. Joint Goal Setting: This step establishes short-term goals, which are performance oriented, between the management and the employee. The responsibilities are clarified to the employees through organizational charts and job description. The goals decided by the employee need to complement the goals of the management. They also need to be flexible to accommodate new ideas without losing individual responsibilities. Moreover they should be easily quantifiable. For example: To prepare, process and transfer to the office superintended, all account payable vouchers within three working days from the receipt of the voucher. To hold weekly meetings with all employees. To use program evaluation and review technique (pert) for all new plant layouts. iii. Performance Reviews: This step suggests frequent performance reviews between the manager and the employees. During the initial stages the meetings be held once a month and later could be quarterly. For maximum benefit these meetings should be scheduled for more than once a year. iv. Set check posts: Establishment of major check posts to measure progress. This is merely to check that the employee surges towards his premeditated (planned) goal without any disruptions. These check levels should be higher in the initial stages and then gradually reduce. This demands that the manager should be on constant alert and exercise sound judgment. v. Feedback: The employees who receive frequent feedback about their performance are highly motivated than those who do not. However, one has to ensure that the feedback is relevant and specific. This helps the employee and the manager understand where they stand.
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The five-sutra process of management by objectives ensures that the manager and the employee define and establish goals and objectives for an employee to be achieved within a prescribed period of time. The employee is to be supervised and evaluated, periodically. To this extent, a frequent feedback and superior-employee interaction model must be evolved. 4. Throughout the time period what is to be accomplished by the entire organization should be compared with what is being accomplished; necessary adjustments should be made and inappropriate goals discarded. At the end of the time period a final mutual review of objectives and performance takes place. If there is discrepancies between the two, efforts are initiated to determine what steps can be taken to overcome these problems. This sets the stage for the determination of objectives for the next period. Benefits of MBO Program a. Helps and increases employee motivation because it relates overall goals to the individuals goals; and help to increase an employees understanding of where the organization is and where it is heading. b. Managers are more likely to compete within themselves than with other managers. This kind of evaluation can reduce internal conflicts that often arise when managers compete with each other to obtain scarce resources. c. Results in a means-ends chain. Management at succeedingly lower levels in the organization establishes targets, which are integrated with those at the next higher level. Thus, it can help ensure that everyones activity is ultimately aimed toward organizations goals. d. Reduces role conflict and ambiguity. Role conflict exists when a person is faced with conflicting demands from two or more supervisors; and role ambiguity exists when a person is uncertain as to how he will be evaluated, or what he has to achieve. Since MBO aims at providing clear targets and their order or priority, it reduces both these situations. e. Provides more objective appraisal criteria. The targets that emerge from the ` process provide a sound set of criteria for evaluating the managers performance. f. Forces and aids in planning. By forcing top management to establish a strategy and goals for the entire organization, and by requiring other managers to set their targets and plan how to reach them. g. Identifies problems better and early. Frequent performance review sessions make this possible. h. Identifies performance deficiencies. It enables the management and employees to set individualized self-improvement goals and thus proves effective in training and development of people.

5.

38

i. Helps the individual manager to develop personal leadership, especially the skills of listening, planning, counseling, motivating and evaluating. This approach to managing instills a personal commitment to respond positively the organizations major concerns as well as to the development of human assets. Such a manager has a far greater chance to move ahead within the management hierarchy. A blank format of Management by Objectives Appraisal form is reproduced as Annexure IV at the end of this report.

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II.

360 FEEDBACK
With the movement in the eighties to find new strengths and productivity through employee empowerment came the idea of performance appraisals from subordinates, their superiors, their peers and themselves 360 feedback. 1. The 360 Feedback process is called multi-source assessment, taps the collective wisdom of those who work most closely with the employee, superiors, colleagues (peers), direct reports and possibly internal and often external customers. The collective intelligence these people provide on critical competencies or specific behaviours and skills gives the employee a clear understanding of personal strengths and areas ripe for development. Employees also view this performance information from multiple perspectives as fair, accurate, credible, and motivating. Employees are often more strongly motivated to change their work behaviours to attain the esteem of their coworkers than to win the respect of their supervisor alone. 2. As the 360 Feedback process better serves the needs of employees, it serves the changing needs of their organizations too. Organizations are reducing hierarchy by removing layers of management and putting more emphasis on empowerment, teamwork, continuous learning, individual development, and self-responsibility. The 360 Feedback Model aligns with these organizational goals to create opportunities for personal and career development and for aligning individual performance expectations with corporate values. 3. Diagram showing the key stakeholders in a 360 Feedback Process

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4. Benefits to Key Stakeholders The 360 Feedback process offers extensive and diverse benefits to key stakeholders in the organization and the organization too: a. Customers: The process gives customers a chance to strengthen the customer-supplier relationship. The 360 Feedback captures the relevant and motivating information from internal and external customers while giving them a voice in the assessment process. Employees: By participating in a process that has tremendous impact on their careers, employees may help select what evaluation criteria will be used to judge their performance and who will provide feedback. Participation plays a critical role for employees as they determine the fairness of the process. Team members: The only option for identifying team and individual members effectiveness is 360 Feedback. Failing feedback from multiple sources, team members lack the information necessary for effective individual development and teamwork. With no team evaluation, accountability may evaporate, and performance may falter (weaken). Supervisors: This process expands supervisors insight regarding the performance of each direct report by providing them more comprehensive and detailed performance information than they usually have access to. Also, the process typically reduces by half, or more, the supervisors time spent on evaluating individual employees. Leaders and Managers: The process provides leaders and managers an opportunity to tap information from the organization that may otherwise not be shared with them for fear of reprisal. Organizations: Organizations can gain access to credible, quantitative information to understand organizational strengths and weaknesses, leadership gaps, and training needs more fully. This information is much more useful than relying on intuitive judgment or responding to those who are making the most noise.

b.

c.

d.

e.

f.

5. Why are Organizations adopting these systems? Structure and cultural factors and employees relations have motivated organizations to begin experimenting with 360 Feedback systems. For example, as organizations remove layers of management, flatten their structure, and begin using self-directed teams, the only practical option for performance feedback is from multiple sources. As organizations change their culture to align with their vision and values, 360 Feedback becomes an ideal choice to communicate the new competencies required by the new values.

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6. Structure changes Organizational structures have changed substantially since the mid-1980s. The 360 Feedback process offers support for these structural changes, such as growth in supervisors span of control, the increased use of technical or knowledge workers, and introduction of matrix and project management organization design, and the move to working in teams. a. Increased span of control: A typical manager used to supervise three to nine employees. Today production and service companies have moved from traditional span of control to one supervisor for as many as seventy or more direct reports. Classic supervisors with a large number of reporting relationships lack the opportunity to observe many individual performance actions. Knowledge workers: A supervisor may not have enough technical or expert knowledge to provide credible performance feedback on employees in positions requiring highly specialized knowledge, like MIS managers or scientists. Many organizations have adopted a multisource system to provide accurate assessments by coworkers with similar expertise. Matrix and Project Management: Many organizations have adopted 360 Feedback systems because their employees work in matrix or project management situations, with employees often reporting to more than one supervisor during a project. Matrix organization structures occur as a result of the need to deploy human assets at high velocity. People move quickly from project to project and may only occasionally interact directly with their supervisor. Project management designs require information from multiple sources because no one person has sufficient information to provide a complete performance picture of the individual. d. Team: When the organizational structure has moved from classic supervisory designs to work teams, with leadership dispersed throughout the team, team members offer highly credible performance feedback.

b.

c.

7. Change in Organizational Culture Revolutionary changes in organization cultures have made traditional singlesource assessments illogical and impractical. Among these changes are: a. Participative Leadership: Organizations have given employees a voice in organizational decision processes and have adopted 360 Feedback systems to drive culture change and align individual behaviours with organizational values and objectives. Leaders who best empower employees are recognized and rewarded when those they lead provide excellent performance feedback. Empowerment: The 360 Feedback process communicates the appropriate actions needed from employees to support this culture change, and these actions are then recognized and rewarded.

b.

42

c. d.

Customer Services: The improved communication through 360 Feedback can translate to better customer service. Quality Focus: The 360 Feedback systems provide the best measures for competencies. This logical application for individual performance measurement meshes with the organizations quality philosophy. Reengineering: Reengineering or the reinvention of work processes often requires new methods to obtain accurate performance measures. Reengineering actions focus on redesigning the way employees work in order to improve individual, team, and organizational productivity. Since 360 Feedback systems improve the quality of information, these systems logically support the reengineering effort at organizations. Competency-Based Reward: Information from multiple sources offers the best method for measuring competencies. Traditional, single-source measures are deficient at assessing competencies because supervisors seldom have sufficient opportunity to observe each employees full range of work behaviours. Team-Based Rewards: 360 Feedback systems are the most appropriate ways to evaluate individual performance and contribution. Team assessment provides these organizations with a credible information source for recognition and rewards. End of Entitlements: Multi-source performance measures more clearly distinguish among levels of performance than do single-source measures. Multi-source assessments are substantially better at distinguishing high, medium, and low performers, enabling appropriate recognition and rewards and an end to automatic entitlements.

e.

f.

g.

h.

8. Employee Relations No other information has more impact on an employees career than information on his or her performance. Hence, the accuracy, fairness and usefulness of performance measures are critical factors to employees. a. Career Development: The 360 Feedback process yields specific and quantitative information for each employee to use in making intelligent career decisions. Fair Reward Decisions: Managers and employees want pay and promotion decisions to be fair. Research across large sets of employee groups indicates that users perceive 360 Feedback to be fairer than single-rate processes. Accurate Performance Measures: Assessment by multiple coworkers is more reliable and objective than information gained from a single person because they have the best opportunity to observe work behaviours. Valid Performance Measures: Assessment information when provided by the individuals work associates; the employee tends to perceive the results as having for more credibility as against a singlesource assessment.
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b.

c.

d.

e.

Non-performance: Supervisors must document, justify and confront non-performance. 360 Feedback systems helps in identifying nonperformers or poor-performers as co-workers and team members are rarely reluctant to identify them if they are not sufficiently contributing to the teams efforts and try to push them if they need help. Diversity Management: Multi-source performance measures moderate adverse discrimination against older employees, presumably recognizing the great experience level; are generally neutral to women as against single-source assessment which are often biased. Legal Protection: Multi-source assessments offer stronger legal protection, resembling the jury system because the model combines multiple perspectives.

f.

g.

9. Pitfalls of 360 Feedback a. 360 feedback has produced some real successes; but when not done artfully, including internal preparation, it can rebound. Colleagues and subordinates are good judges of behaviour and managerial style but are not best judges of a managers job performance. Hence the ratings should be used with caution in decisions for pay and promotions. b. In practical, peers and subordinates tend to give negative feedback about a manager due to bias or for setting scores. Such feedback may get undue importance when only selected few peers and subordinates appraise a manager. c. Also, at times, the organizational culture is unable to accept the system. 10. Options for implementation There are three common ways of getting 360 degree feedback each more comprehensive and powerful in promoting change, both organizational and personal: i. ii. iii. using an outside consultant, minimizing any personal friction within the organization; launching a comprehensive program in-house to get feedback on all key people, top to bottom; creating a comprehensive program designed to uncover not just personal flaws but systematic and organizational ones, too.

The implementation of the same are detailed below: a. Send a few managers to an outside consultancy for assessment and feedback. Here, managers may hand out survey to whom they know (and expect to get feedback with minimal negative information) the data collected by the consultancy, and the managers receive an "offsite" training and feedback session with similar managers from different companies.

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While this approach has its merits, its major deficiency is that a few individuals are changed, the overwhelming mass of management is not, and the systems and processes that encourage old behaviors are still in place. b. The second approach is to bring such a program "in-house", where many managers receive 360 feedback. In this approach, the feedback can be more systematic for two reasons: i) surveys are handed out to all subordinates and peers rather than those who have been "volunteered" by the person receiving feedback. This tends to reduce "sampling bias" of just giving it to those who might give just good feedback; and ii) the implementation of this process can be from the top of the organization down the bottom. This has the advantage of allowing upper management to be an example of willingly receiving such feedback and encourage them to be both models of behavior and coaches to those underneath them. The third approach involves all of the second approach, and also deals with "systems issues." Where 360 feedback alone can only deal with problems caused by individual behavior, it by itself does nothing for the systemic causes of problems, such as organizational structure, inappropriate and distorted measurement systems, company-wide lack of skills, or performance appraisal and pay problems. 360 Feedback can serve both as a catalyst to help management realize the systemic causes of organizational problems, and can be part of the solution, so that management style becomes in harmony with other organizational changes senior management is trying to make.

c.

11. The following issues need to be considered before implementation of 360 feedback Questions about implementing 360 feedback are easy to ask but not so to answer. Often times, management assumes the answers but does not openly discuss them with the result being much chaos and confusion down the road. Among these some of these questions are: a. How ready is your organization to handle 360 Feedback? Often times, organizations may be willing to pay consultants to assist them in implementing such a system, but the organization needs to be prepared. At times, "soft skills" training in communication, leadership, management style, meeting management etc. is useful in preparing management. Teambuilding activities might also be useful, as well as a general organizational climate survey to determine the context of implementation and find any additional issues beyond management style that might be a problem. Who needs to agree? Who will be the decision-making body about 360 feedback? Will it be the head of the organization, or Human Resources, or a cross-section of employees from a variety of levels?

b.

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c. d.

e.

f.

g.

h.

i.

j.

k.

Who will be involved? Which employees are to be the focus of the 360 feedback, and who will provide it to them? Is this voluntary or mandatory? Will some employees be offered the "opportunity" to receive this feedback, will everyone receive it, or will just management receive the feedback? What methods and measurements will be used? Will employees just fill out numerical surveys, or will this information be supplemented with observations and interviews? Will the report be just a graph, a summary of high need for change survey items, or will there be a written report with recommendations? To what extent will this report be personalized and handcrafted Vs being automated? To what extent will the data be collected anonymously and/or confidentially? While the intent may be to keep the survey data anonymous, if written comments or interview data are also included, the data may have to be altered to avoid making obvious conclusions about who communicated what. In addition, management must answer questions about personal, confidential data that might be accidentally revealed during interviews. To what extent will the data be collected anonymously and/or confidentially? While the intent may be to keep the survey data anonymous, if written comments or interview data are also included, the data may have to be altered to avoid making obvious conclusions about who communicated what. In addition, management must answer questions about personal, confidential data that might be accidentally revealed during interviews. What will be done with alleged violations of laws, ethics or policies? Though this may not be the intent of 360 feedback, on occasion information is gathered that suggests violations of legal, ethical and company codes of conduct. What information will be public? At first blush, you might think that all data will be private, but does that mean that one's own supervisor can't see the data and the report? Will group and company averages be made public without them being broken down into individual scores? What consequences will there be? Will they receive additional coaching and counseling, training, or be terminated or re-assigned? Will the 360 feedback be the sole determiner of this decision? What logistics and support will be necessary to make this successful? To what extent will the data be collected electronically (via the Web or intranet) or on paper? What administrative and technical support will be necessary?
What systems changes will accompany this organizational change? As stated before providing feedback on management style in and of itself can only be part of organizational change and can rarely stand on its own. As a result, one must ask how and when will 360 degree feedback be incorporated into training, selection and pay decisions?

l.

12. The flow diagram attached as Annexure V explains the 360 feedback process and Annexure VI is a blank sample of 360 feedback form (for the Head of Support Unit of an University).

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III.

Balanced Scorecard
1. Balanced Scorecard (BSC) is a set of measures derived from an organizations vision and strategy. It is a concept that helps translate strategy into action. It requires an organization to balance its goals across multiple perspectives to reduce the chance that one goal will dominate others to the detriment of the organization. It leads to a realistic compromise that addresses short-term goals and longer-term staying power. The balanced scorecard was developed by Robert S. Kaplan and David P. Norton in early 1990s. The article The Balanced Scorecard - Measures that Drive Performance of Harvard Business Review (year 1992) describes balanced scorecard as a methodology used for measuring success and setting goals from financial and operational viewpoints. With those measures, leaders can manage their strategic vision and adjust it for change. BSC links performance measures by looking at a business's strategic vision from four different perspectives: financial, customer, internal business processes, and innovation & learning. These four perspectives of the Scorecard provide a balance between desired outcomes and drivers for those outcomes and between objective and subjective performance measures. BSC is prescriptive about a balanced range of measures and about how one perspective defines the drivers for the next. a. Financial Perspective The financial perspective provides a view of how the senior executives, the board of directors and the shareholders see the company. Typical metrics in this perspective might be earning per share, revenue growth and profit maximization. In the BSC, financial measures play a dual role: they define the financial performance expected from the strategy and they serve as the ultimate targets for the objectives and measures of all the other scorecard perspectives. The financial measures are chosen based on the business life cycle and also the strategic theme chosen for the financial perspective. In addition to increasing returns, most organizations are concerned with the risk of these returns. Therefore, when it is strategically important, these organizations will want to incorporate explicit risk management objectives into their financial perspective. As a conclusion, eventually all objectives and measures in the other scorecard perspectives should be linked to achieving one or more objectives in the financial perspective. b. Customer Perspective The customer perspective provides a view of how the customers see the company. Kaplan and Norton contend that, " to put the balanced scorecard to work, companies should articulate goals for time, quality,
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2.

3.

and performance and service and then translate these goals into specific measures." Overall, this is a measure of how the company provides value to the customer. Changes made to a business process output that lowers the customers cost or allows the customer to achieve his or her objective, have value for the customer. For example, its not enough to simply bring down the cost of an item. The delivery time and manner in which the customer is dealt during times of sales and support are important as well. It is a measure of that value that should be captured by the metrics (e.g. market share, customer satisfaction, customer loyalty, customer acquisition) representing this perspective. In this perspective, managers must first determine core measures that will describe the successful outcomes of a well-formulated and implemented strategy. They have to also identify what are the attributes that the customers value and choose the value proposition that they want to deliver to the targeted customers. Today, many companies have a corporate mission that focuses on the customer. c. Internal Business Process Perspective The internal business process perspective provides a view of what the company must excel at to be competitive. Kaplan and Norton recommend that, "companies also attempt to identify and measure their company's core competencies, the critical technologies needed to ensure continued market leadership." In this perspective, the managers must identify the internal processes that are crucial to their organization and develop the best possible measures with which to track the organizations progress. These processes should help them deliver superior value to their customers and achieve financial targets. The Balanced Scorecard go beyond the simple assessment of existing processes, and usually identifies new processes that the organization should implement in order to be successful. By incorporating innovation processes measures, the Balanced Scorecard provides managers with a set of tools that does not only reflect the short term, but also gives insight about the longer-term. d. Innovation and Learning Perspective Kaplan and Norton underscore the importance of innovation and learning in their statement that, "a company's ability to innovate, improve, and learn ties directly to the company's value." While the financial perspective deals with the projected value of the company, the innovation and learning perspective sets measures that help the company compete in a changing business environment. This is of principal interest to the CEO and the architects of the long-range business plan. Their focus for this innovation is in the formation of new or the improvement of existing products and processes. This

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perspective looks at how effectively the organization can redesign and implement new business process, introduce and exploit new technology and adapt to changing conditions in general. Thus the measures in this perspective are truly the enablers of the other three perspectives. These measures are like the roots of a tree that will ultimately lead through the trunk of internal process to the branches of customer results and finally to the leaves of financial returns. Metrics of this perspective can be adaptability, employee satisfaction, and willingness to share and gain knowledge. With the financial, customer and internal perspectives, managers are able to identify the gaps between existing organizational resources and the ones required to be successful. The only way to close those gaps is for the organization to judicially invest in employees and information technology and to design the most appropriate organizational structure that could support their strategy. The given below diagram shows the Balanced Scorecard.

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4. The steps of implementation are: Identifying and defining Key Performance Indicators from the multiple perspectives: First the multiple perspectives are to be identified, which can be, as: Financial Measure, Customer Measure, Internal Process and People (Learning & Growth). After this the main task is to identify the Key Performance Indicators (KPI) in each of these multiple perspective. a. Identifying Key Action Areas b. Implementation of Key Action Areas c. Monitoring Key Action Areas

5. The advantages of the Balanced Scorecard: a. First, the measures incorporated in the Balanced Scorecard are grounded in the organizations strategic objectives and competitive demands. Therefore, this set of critical indicators helps the organization focus its efforts on the strategic vision. b. The four perspectives of the Balanced Scorecard enable organizations to track financial results while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets they need for future growth. The Balance Scorecard then becomes the cornerstone of the organizations current and future success. Also, by balancing external and internal measures, there is no trade-off among key success factors. Finally, managers can use the Balanced Scorecard to: clarify and gain consensus about the strategy; communicate the strategy throughout the organization; align departmental and personal goals to the strategy; link strategic objectives to long-term targets and annual budgets; identify and align strategic initiatives; perform periodic and systematic strategic reviews; obtain feedback to learn about and improve strategy. 6. Potential Problems with a Balanced Scorecard: a. The creation of a Balanced Scorecard involves a considerable amount of time on the part of everyone whose performance will be measured; the selection of appropriate measures for the four perspectives too is very time consuming. This is simply due to the fact that there are a large number of potential goals and targets and even more ways to measure them. People are likely to disagree about which objectives to measure and how to measure those objectives, and it will take time before consensus is achieved.

c.

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b. The time factor involved in designing a Balanced Scorecard can be considerable since it involves a lot of people in the organization. Their commitment is important not only in building the Balanced Scorecard but especially in implementing and using it. Although a Balanced Scorecard may be well designed, lack of participation and commitment on the part of staff will make the scorecard useless. c. Finally, there is always a chance that too many measures will be selected. This is a problem because it is very difficult to track a large number of measures. Furthermore, some of the measures selected may be objective, such as employee turnover rates, and other measures may be subjective measures, such as employee morale or quality time spent with customers. The subjective measures, by definition, involve somebodys judgment and, therefore, are more prone to error. Consequently, there is a question whether subjective measures should be used and if so how can they be made more reliable.

A sample blank eAppraisal (discussed in the forthcoming Chapter 12) form implementing Balanced Scorecard in it is shown in Annexure VII.

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Chapter 12 ELECTRONIC APPRAISAL SYSTEM (eAPPRAISAL)

eAppraisal is a recently introduced method of performance appraisal that eliminates paper work. eAppraisal simplifies and enhances the employee performance appraisal process. It has features that make its use easy and helps both HR administrators and line managers produce better results more quickly. It provides an organization with a powerful tool to help develop organizations critical talent all year round. It is easier to conduct eAppraisals by automating the time-consuming process of administrating employee performance reviews. It is flexible and can be customized to suit an organizations needs. The comprehensive workflow makes it easy for human resource professionals to manage the process by approving appraisal forms, monitoring the status and sending automatic email notifications to managers. eAppraisal templates and robust content options, help appraisees to create appraisals quickly and professionally. I. Features:
intranet-based Ease of use Sophisticated workflow Centralized repository User customizable performance appraisal forms Automated email notification and reminder notice Comprehensive status and action view for HR manager Competency-based text answers and/or range scale Self-rating capabilities Continuous performance journal entries throughout the year Import employee data from the HRIS system of the organization Scoring and weighting capabilities

II.

Benefits:
Appraisals are processed more quickly and efficiently. Appraisal data is received by concerned superior/manager in virtual real-time

when the appraisal is uploaded into eAppraisal system.

It can be attached to the e-Target Setting wherein it imports data of e-Target

Setting and the weightage and scoring is done based on the e-Targets decided mutually by the appraisee and his manager.
Appraisals cannot be misplaced or lost, as is possible with hardcopies.

Appraisals can be stored electronically and available online.

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III.

In an eAppraisal all the new frontiers of appraisal systems can be incorporated. How? The appraisee and his manager decide on the individual targets with are in line with organizational targets. With periodic reviews the targets can even be modified. The targets can be decided keeping in mind the 4 perspectives of Balanced Scorecard viz financial, customer, internal business processes, and innovation & learning. The programming of eAppraisal can be customized accordingly. The weightage and scores can be divided not only on these perspectives but also on the personal strengths and weaknesses of an individual as well as the training and developmental needs. To assess the strengths and weakness of an individual 360 Feedback system can be used and accordingly the training and developmental needs can be identified.

IV.

Process:
The eAppraisal process chart is attached as Annexure VIII. The process has been detailed below:

The appraisee creates an eAppraisal and fills up Key Performance Areas (KPAs) & achievements with their weightages. In short he does self-appraisal. The system aggregates the rating as per the formula and calculates total score as well as overall rating.
Appraisee submits the eAppraisal request to his reporting manager (Main Appraiser). Appraisee can also intimate other appraisers, if any, through the system before submitting his request to the Reporting Manager. The reporting manager receives an email with the document-link of submitted request.

Reporting Manager enters his rating and can change the weights of each KPA
achieved by the employee and the system recalculates the totals and overall rating. However, the ratings/weights entered by appraisee cannot be changed. Appraiser has to also complete the section on Overall Assessment, Strengths & Training Needs.

After completing the evaluation, Appraiser submits the eAppraisal to the reviewer, who is reporting head of reporting manager. System will intimate the request by an email to reviewer to the document link. If necessary, appraiser has option to return the appraisal back to the appraisee and request for suitable modifications and re-submission.

Other appraisers, if any, enter their aggregate rating and comments in appraisal summary & review section. Reviewer sees the scores & comments entered by the appraisee, the Appraiser and other appraisers. Reviewer enters his overall rating & comments on the same. Then the reviewer forwards the same to the Human Resource (HR) department. Reviewer has an option to send it back to appraiser if necessary.

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HR accesses to various summary views to help them analyze the appraisers. They also identify activities behind schedule and intervene as necessary to expedite. The data is then presented to the Management Committee. The HR person enters the final overall rating and comments. At the above stage final discussions between main appraiser and appraisee take place and the appraisee confirms this by adding the date of discussions and his own comments. Thus this process is fully transparent as appraisee can view the rating and comments entered at different levels.

A blank format of eAppraisal for junior management level staff is attached as Annexure IX.

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